IMF board set to approve $550m tranche tomorrow

ISLAMABAD - International Monetary Fund (IMF) Executive Board is scheduled to meet Monday (tomorrow) for the second economic review of Pakistan under the extended arrangement, prior to approving third tranche of $550 million.“IMF board will approve third tranche worth of $550 million on Monday, which will help in building the country’s foreign exchange reserves”, a finance ministry official said on Saturday. The upcoming tranche would take the country’s foreign exchange reserves to $10 billion by the end of current month (March). Pakistan’s foreign exchange reserves currently stood at $9.65 billion. An IMF staff mission, led by Jeffrey Franks, met with the Pakistani authorities in Dubai from February 1-9, 2014 for discussions on the second review of Pakistan’s IMF-supported programme under the Extended Fund Facility (EFF) approved by the Executive Board of the IMF on September 4, 2013. Therefore, the Executive Board of IMF would approve the next tranche after reviewing IMF staff mission’s report.Pakistan had received two tranches worth of around $1.1 billion since September 2013. Meanwhile, Pakistan would receive two further installments of $1.1 billion before June 30. The IMF, in its report released after second review, has stated that Pakistan’s economy is showing signs of improved economic activity. Services and manufacturing are driving better-than-expected GDP growth, as reforms in the electricity sector seem to be bearing fruit with electricity shortages and unscheduled load-shedding declining. Led by large scale manufacturing and service sectors, growth is picking up and is now expected to reach about 3.1 per cent for FY2013/14 as a whole, compared to the earlier estimate of 2.8 per cent. Fiscal performance continued on track in the second quarter of 2013/14, with initial consolidation efforts relying on revenue mobilization and reduction in energy subsidies. On the external side, while the SBP has continued its efforts to rebuild reserves, and the foreign exchange market has stabilized, pressures on the balance of payments are likely to persist for some months. According to the report, the authority’s reform programme remains broadly on track, with the government meeting all of the quantitative performance criteria by end December 2013, with the exception of the targets on SBP’s net swap/forward positions and the ceiling on government borrowing from SBP. The authorities have reaffirmed their commitment to adopt the necessary corrective actions, including measures to improve the financing of government debt through a medium-term strategy of institutional development and deepening of the government’s securities market. Progress on the unwinding of the SBP’s swap/forward positions to reach programme limits is underway, and progress on this front is satisfactory so far.